Dave McClure
Silicon Valley, CA
- 32 comments
- 23 likes given
- 71 likes received
Geeks. Founders. Startups. The Internet Revolution. Founding Partner & Sith Lord, 500 Startups
fabulous post, and appreciate all the data & insights.
note: i'd suggest summarizing the top-line summary succinctly as "enterprise sales is hard -- and constrained by finding expensive & talented sales people".
a corollary to this might also be "if you can develop scalable channels of online marketing, you might have an easier time focusing on consumer and/or SMB customer targets, where direct sales is not the critical factor".
this is a critical observation, and one of the reasons 500 Startups focuses more on consumer & SMB businesses over enterprise -- they take advantage of the growth of online audiences, the dramatic increases in reach available via search / social / mobile platforms, and they also don't require anywhere near as much resource cost to scale.
this is perhaps an overgeneralization / re-iteration of your main points, but you could make both these points equivalently:
- enterprise businesses monetize well, but are notoriously difficult & expensive to scale, largely due to challenges in growing a direct sales team.
- consumer (and also SMB) businesses may or may not monetize well, but they are comparatively MUCH EASIER to scale, largely due to the efficiencies and advances in online marketing channels, and the relative ease of automation / low-cost compared to people-driven enterprise biz.
DMC
and we are very happy to have you folks in 500 Startups too :)
legit points on raise / capitalization / etc.
however I didn't think the international piece was on target, and since we've invested in 3-4 intl ticketing co's, we think that's got plenty of potential for traction.
Bryan: pretty sure EventBrite has come NOWHERE CLOSE to expanding in the international front based on the opportunities available in major economies across europe & Asia & Latin America. we have invested in ticketing startups in Japan, brazil, chile, and have other opportunities in emerging markets and developed markets as well.
whether or not EventBrite is over capitalized ill leave to other tea leaf prognosticators, but at least one of your arguments is faulty here. and I also have Ni idea why you think ticket master wint be surpassed -- there is most certainly a TON of unexplored market opportunity in the US, and regardless ticket master is absilutely vulnerable to competition.
perhaps kevin has raised money because he can, but it's not clear to me there isn't plenty of opportunity to grow into a larger valuation based on both domestic and international market potential.
other than those gross inaccuracies, the rest of your piece is quite thought-provoking.
DMC
just to clarify: the 500 Startups *Fund* invests the capital (typically $50K USD), and our 500 Startups Accelerator (separate LLC) charges btwn $12-24k per company, depending on # founders / non-founders participating.
as you suggest, net proceeds to the startup end up being $26-38K, which is actually more than most other accelerators provide total.
note: the reason we charge a program fee is to be able to cover our own costs and operate with larger staff and resources than most other accelerator programs. in future, assuming we have more capital under mgmt / more funds from other sources, we may do away with the program fees, however over the last 3 years it's been a useful way to cover our costs as we got off the ground. that said, it can be a challenge explaining to companies why we charge fees when most others don't.
thanks for providing the detail on how we operate. appreciate the correct info.
DMC
congrats to Rick Baker & Niki Scevak -- StartMate is a terrific program, and 500 Startups has already invested in over 7 StartMate companies, and over 10 Aussie startups in total! #ozzieozzieozzie #oyoyoy!
@bgoldberg @DaveMcClure @orangerobot I was drunk, and being overly snotty / VC-like... also hadn't read it very closely when I first replied. after sobering up a bit, decided it was unnecessarily aggressive and deleted it.
DMC
ok, i've re-read this post again, and i get where jake is coming from... perhaps my initial knee-jerk reaction was incorrect.
while i still don't quite agree with a binary perspective of "big IPO = success / everything else = failure", i can certainly sympathize with the personal tragedy of selling your company to someone who doesn't always share your vision or values. (i had to sell my first business in the mid-90's, and it also wasn't a pretty situation).
(gee whiz, maybe i've become a little too much of an investor... and yes i do share the desire to create a great big company someday)
DMC
@orangerobot @DaveMcClure agreed that most acquisitions are not the dream that the founders had for the company... however to label them ALL as a "failure" is an extreme perspective that isn't accurate on either an economic, or on product / customer terms.
while i can sympathize with Jake -- i also had to sell my first company to an acquirer under less-than-ideal terms, and i also felt like i was selling my baby -- i would suggest that this perspective is a bit narrow around very personal and selfish goals for the founder, and not necessarily in the best interests of the employees or customers.
in any case, i agree and understand that not all outcomes should be measured in economic terms -- but neither should the outcome be considered binary as either a success or failure. there are many shades of grey inbetween.
thank you for being straight up and fair sarah.
hopefully not all ecommerce companies out there are buying customers and revenue on low-margin business, but as you state it has worked out for some and not for others. indeed it may be the case that many companies are being optimistic about long-term custom value, but at least for some with decent margins I don't think it will be the case for all.
in any case, my investor role here is likely less important than my personal role, at least to everyone who isn't one of my LPs. jody was a friend who I cared about, and altho we weren't the majority investor in the company, he was one of our portfolio company founders who we lost to a tragedy. for that, I'm truly sorry I wasn't able to pay closer attention to his needs, whether stated or unstated, and lend him a helping hand or ear when he needed it.
the situation is one I hope we all learn from, and can perhaps try harder to prevent in future.
jody: we miss you bro... you left us too soon.
DMC
so very sad :(
congrats Mickey! sounds like a great thesis.
(happy to be co-investor in ContaAzul with you already :)
DMC
great stuff! congrats Sam Teller, Mark Suster, and other folks involved :)
happy new year michael :)
smart & experienced team, beautiful & effective product, large market opportunity, clear business model.
one of our easiest investment decisions.
much respect & props to bowei... he's planning to visit almost every interesting tech metro on the planet!
500 Startups is psyched to support the WSR effort & look forward to hearing more from tech startups all over the world!
DMC
this is excellent. especially like 10.
nice job Sanjay & James :)
(altho I think 4/5/6 are all the same thing)
@rekatz doesn't usually happen. if they're "killing it" then usually they have a viable raise happening. if not then something else likely going on.
we occasionally will put more money in when we think things are working but investor market hasn't decided if there's enough traction yet, but generally we prefer other larger / downstream investors make those calls first.
our fund isn't large enough to prop up companies that are stuck between incubation & seed, or seed & series A, and it's probably not a good investment thesis to be doing so anyway.
companies that are performing usually are able to raise (at least some) money. 500 doesn't typically do bridges.